I'm still on the fence (and finding the regs as clear as mud).  So let's follow the bouncing ball.  199A is at the top of the food chain, in particular, (c)(3):

https://www.law.cornell.edu/uscode/text/26/199A#c_3

(3) Qualified items of income, gain, deduction, and loss   For purposes of this subsection—

(A) In general   The term “qualified items of income, gain, deduction, and loss” means items of income, gain, deduction, and loss to the extent such items are—

(i) effectively connected with the conduct of a trade or business within the United States (within the meaning of section 864(c), determined by substituting “qualified trade or business (within the meaning of section 199A)” for “nonresident alien individual or a foreign corporation” or for “a [1] foreign corporation” each place it appears), and

(ii) included or allowed in determining taxable income for the taxable year.

To me that has always meant you'd have to subtract 1/2 SE tax, SEHI, SEP-IRA, etc. but mostly I've been thinking in terms of Schedule C.  I was about to abandon the crazy notion that these things reduced QBI since nobody else seemed to think so, there was no mention of these things in the proposed regs that came out last summer, and none of the software programmers were factoring them into the QBI calculations.  That is, right up until the IRS issued final regs in January 2019:

https://www.irs.gov/pub/irs-drop/td-reg-107892-18.pdf

Which threw out this never-before-seen tidbit 1.199A-3(b)(1)(vi) (page 198):

(vi) Other deductions. Generally, deductions attributable to a trade or business are taken into account for purposes of computing QBI to the extent that the requirements of section 199A and this section are otherwise satisfied. For purposes of section 199A only, deductions such as the deductible portion of the tax on self employment income under section 164(f), the self-employed health insurance deduction under section 162(l), and the deduction for contributions to qualified retirement plans under section 404 are considered attributable to a trade or business to the extent that the individual’s gross income from the trade or business is taken into account in calculating the allowable deduction, on a proportionate basis to the gross income received from the trade or business.

This still makes sense to me from a Sch C standpoint.  So maybe I'm not crazy, or at least maybe I'm not wrong.  We'll leave the crazy determination for another discussion.  But if we step over into the S Corp and Partnership realm, the math starts to fall apart.

Say I have an S Corp with net income of $100,000 before owner salary/benefits.  The owner takes a $50,000 salary and has $10,000 of health insurance added to the W-2.  Year-end we have a $60,000 W-2 and a $40,000 K1.  The $40K K-1 is QBI but the wages are specifically excluded by statute.  But remember the wages would have only been $50K if it weren't for IRS Notice 2008-1 which dictates the hoops we have to jump through to "move" this income from the K-1 to the W2 and then back it out again as an above-the-line adjustment.  Same bottom line, $90K of income after the adjustment and prior to 2018 (aside from SS/MC taxes) we didn't really care too much which line it was on.

So now the debate becomes, is QBI $40,000 or is it only $30,000 since the SEHI is effectively connected AND included or allowed in determining taxable income.

Common sense would say, no, you don't deduct the $10K again, it's already been deducted once from QBI when we moved it to the W-2.  But that's not exactly clear from the regs.  In fact, I'm not really sure what they're asking us to do when they say "to the extent that the individual’s gross income from the trade or business is taken into account in calculating the allowable deduction, on a proportionate basis to the gross income received from the trade or business."

On a proportionate basis to huh?  But let's table that and try to decipher the "extent that the gross income is taken into account in calculating the allowable deduction."  Well, for my S Corp example, both the $40K K-1 income AND the $50K W-2 income are "taken into account" so my SEHI deduction would be limited by the total $90K of income.  Do we proportion that somehow?  And "gross income"?  Maybe "gross" doesn't mean what I think it means.

Or let's move to a more extreme example, maybe our S Corp only made $60K, paid $50K wages and $10K SEHI.  So our K-1 is $0, W-2 is still $60K and SEHI is $10K, arriving at $50K of AGI.  The $10K SEHI is still allowed because the wages count.  Do we have $0 QBI or -$10K QBI?  Well, certainly the $0 K-1 number plays no part in the "allowable deduction" because, math.  So, absent something more concrete from the IRS (or Congress, but I have trouble mentioning that option with a straight face), I think it's appropriate to "order" the W-2 wages first and then the K-1 income second.  So if there's enough W-2 wages to support the SEHI then IMO the full K-1 number is QBI and the SEHI has no bearing on QBI.  Our dearly departed friend Chuck would say, CAGMC.

Ditto if you have a Partnership where the SEHI is included in Guaranteed Payments.  GPs are already excluded from QBI, how could it make sense to subtract SEHI again?

But unfortunately there's no prerequisite that tax laws have to make sense.

Rick